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Is Bitcoin a Viable Currency?

The recent rise in the value of Bitcoin has captured the world’s attention with its recent meteoric price bubble. The value of Bitcoin has grown over 200% in 2017 alone. If you are considering jumping into the mania and purchasing a Bitcoin, here are five good reasons why you may want to sit on the sidelines a little longer.

The Pro’s of Bitcoin

Bitcoin does have some truly unique characteristics. One of the most attractive points is the fact that it is a totally anonymous and unregulated form of payment. Cryptocurrency is the term used to describe all Blockchain-based currencies.

The sad fact is that governments control our money and our lives. Today, RFID chips are embedded in everything from credit cards to passports. A magnetic card reader tracks every purchase you swipe for and an ATM card dispenser controls your access to your money. Magnetic card readers are manufactured by various companies.

If you have ever been through customs at an airport, then the RFID chip in your passport is picked up by a passport scanner and used to verify your identity.

Bitcoin is not regulated by a reserve bank or its government, making it immune to inflation and devaluation. In essence, Bitcoin is a true ‘market-driven’ currency, with its price determined by supply and demand of the currency.

Bitcoin Price Graph

Bitcoin has slowly been adopted as a means of paying for goods and services online. Most Bitcoin transactions happen instantly and you will receive your Bitcoin into your virtual wallet minutes after purchasing it.

Bitcoin - The Risks

#1 The Bitcoin price is volatile

Bitcoins trade at astronomical prices exceeding $3000 in today's market. Considering that it was only $250 per Bitcoin only two years ago, this price increase has fueled speculation and a buying mania. In 2013 Bitcoin was trading above $1200, and in a matter of days crashed to $200. This phenomenon has returned with today’s Bitcoin price. Many experts feel that the current price bubble is ready to burst. Before you run into the market, wait for the bubble mania to subside and the price consolidates.

#2 The favored currency of criminals

Bitcoin gained notoriety in 2010 as it was adopted as the currency for the infamous ‘Silk Road’ website that offered black market, illegal services, and products to people on the dark web.

Bitcoin could purchase anything from a gram of cocaine to a hired hitman. Shortly after the Silk Road was shut down by the FBI, the Bitcoin price collapsed. Today, Bitcoin is still used by criminals, as the recent ‘Wannacry’ malware attack that rapidly spread the globe and infected machines and networks all over the world. The ransomware demanded payment in Bitcoin for recovery of sensitive data.

#3 Bitcoin has a tiny market cap

Even with a current market cap exceeding $35 billion, Bitcoin is still tiny compared to the global FX market that trades over $5.5 trillion every day. A few of the world's billionaires could band together and capture the entire market if they wished.

There are also over 300 recognized cryptocurrencies that offer a better technology than the Bitcoin blockchain. Ethereum is an example of a competitor cryptocurrency that is rapidly gaining market share and could usurp Bitcoin in the near future.

#4 Keys can be lost & so can your Bitcoins

Bitcoins come with an ID. This ID can be stolen by hackers and your coins stolen, as was the case with the breach in the Bitcoin exchange Mt. Gox, which led to the 2013 Bitcoin price crash.

Hackers have come up with all different methods and tools aimed at stealing Bitcoins. An example would be a malware that removes your key when you copy and paste it, replacing it with a key that does not work.

#5 Reliant on electricity

What happens if the lights go out? Where will your Bitcoins go and how will you access them if there is a power outage or an internet collapse?

The Final Thought

While Bitcoin is geared to be the future of currency, the current market conditions and properties of Bitcoin make it something of a risk. Before you go and dump your life savings into this asset, consider if that's a wise move. While every portfolio should have a bit of crypto in it, Bitcoin is still a long way off from being recognized as a true global currency.

Is Bitcoin a Viable Currency?
Reviewed by Shubham Gupta
on
June 07, 2017
Rating: 5